Who are your competitors?

The merger of Whole Foods and Wild Oats, completed long back, is still being challenged by FTC. The reason for the continued fight despite losing the law suit the first time is FTC’s belief that the merger created too large a player in the natural foods market.  It is clear that FTC defined he market and the competitive landscape very narrowly and not in the broadest scope any marketer worth his salt would.

In his seminal article, Marketing Myopia, Ted Levitt talks about the failure of companies that defined themselves too narrow and failed to anticipate competition from outside. The competition to Whole Foods is not just Trade Joe’s and Planet Organic but any distribution channel. Douglas, who writes the Healthy Habits blog, did a great job of researching the market size, organic food suppliers and channels. His data shows the market size of organic foods is less than 3% of total food sales (in 2006) and most importantly the Relative Market Share (market share  of follower compared to leader or vice versa) of  Supermarkets is approaching 1, showing an equal split.

By this definition, the competition is not what FTC defined to be but included supermarket chains. Among these, Wal-Mart with its competitive advantage in economies of scale and supply chain management can and will easily enter the natural foods market and dominate.

Instead of continuing to fight the merger battle, FTC should let the market competition decide the fate of Whole Foods. After all the merger in itself introduced other problems not the least of which is the continued lease payments for the erstwhile Wild Oats locations.

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